FOR IMMEDIATE RELEASE
2008-191

Washington, D.C., Sept. 9, 2008 — The Securities and Exchange Commission today charged three former senior executives of Embarcadero Technologies, Inc., alleging that they fraudulently backdated stock option grants to employees at the San Francisco business software company and reported false financial information to shareholders.

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The SEC alleges that former CEO, President and Chairman Stephen R. Wong, former CFO Raj P. Sabhlok, and former Controller Michael C. Pattison concealed millions of dollars in compensation expenses associated with valuable "in-the-money" options secretly granted to company employees.

"By engaging in a protracted backdating scheme, these executives abandoned their responsibilities as management's primary financial gatekeepers, instead allowing the company to misrepresent its financial condition to shareholders," said Marc Fagel, Regional Director of the SEC's San Francisco Regional Office.

The SEC's complaints, filed in federal district court in San Francisco, allege that Embarcadero routinely provided valuable options priced at below market prices to its employees. The SEC alleges that the three executives allowed Embarcadero to avoid reporting expenses for these options by backdating paperwork to make it appear as if the options had been granted on an earlier date, when the stock was trading at a lower price. According to the SEC's complaints, Embarcadero made hundreds of backdated stock option grants during 16 consecutive quarters. As a result, the company significantly overstated its net income (or understated its net loss) from 2000 through 2005. In the year with the largest percentage impact, Embarcadero understated its net losses by more than 500 percent.

The SEC's complaints also allege that all three executives participated in backdating grants, each playing a role in falsifying paperwork, selecting false grant dates, and filing false financial statements. Moreover, according to the SEC, Sabhlok and Pattison used false documents to support large option awards to themselves that were collectively in-the-money by almost $1.5 million — a potential windfall hidden from Embarcadero's shareholders.

Wong, without admitting or denying the allegations, agreed to settle the SEC's charges by consenting to a permanent injunction against violations of the antifraud and other provisions of the federal securities laws, a $250,000 financial penalty, and a five-year bar from serving as an officer or director of a public company.

The Commission's litigated action against Sabhlok and Pattison charges both with violating the antifraud and other provisions of the federal securities laws. The Commission's action seeks injunctive relief, civil monetary penalties, and disgorgement of wrongful profits. Additionally, against Sabhlok, the Commission seeks forfeiture of bonuses and stock sales pursuant to Section 304 of the Sarbanes-Oxley Act and an order barring Sabhlok from acting as an officer or director of a public company.